Greetings;
So, the DoJ, which has opposed every railroad merger since Baltimore + Ohio, weighed in on the proposed, rather complex CSX-Pan Am acquisition. Specifically, it weighed in against the proposed remedy of a competitive issue on a portion of the Pan Am (PAR), the Pan Am Southern, currently a 50/50 JV with CSX’s arch-rival Norfolk Southern. Under the CSX-PAR proposal, CSX would take over the PAR’s 50% position (are you still with me?), but the entire PAS entity would be run by another short line (holding company), Genesee & Wyoming (GWR). DoJ states that such an arrangement gives GWR too much power (specifically in New England, where it already has a big carrier, the New England Central, and, oddly, NSC too little power (CSX, owning the PAS track, could “diminish” or “hamstring” NSC’s competitive capabilities….Some thoughts:
- This will be decided by the STB, an independent body (see KSU, the fight over), not DoJ (who also weighed in against the CNI+KSU deal, natch)
- This does provide some cover, potentially, for the STB (see KSU, etc)
- This is a further sign of the changing rail political situation; in fact, the very first line of the DoJ filing mentions the Biden Executive Order, in which the rails were “singled out” (along with 71 other industries); also CSX remains in the cross-hairs of the DC anti-PSR crowd
- The potential GWR competitive issue is on what DoJ listed as the “Knowledge Corridor” connecting CT to VT (and an anxious Vermont Central, an independent); I had initially assumed that this was a joke since said “Knowledge Corridor” starts in New Haven….
- As reported in Roy Blanchard’s WIR, CSX EVP Mark Wallace (boy, it’s good to hear from him!) submitted his “Supplemental Verified Statement” on 8/19 citing a 5-year growth CAGR of 1.5%, with extraordinary detail on how that is to be achieved….
- Meanwhile, old friend and former Acting Chairman of the STB, Frank Mulvey, wrote an Op-Ed in favor of the merger because it better connects New England to the North American Class One network, and saying that the biggest concerns raised (presumably before the DoJ) were passenger (Amtrak being a focus of the administration, of course), but that they were “not insurmountable” (and CSX’s job #1 was to improve/harden the PAR infrastructure of what CSX has called an “under-resourced rail network”)
- If this, along with the ongoing saga of the Massena lines (upstate NY, sold by CSX again to CN, approved with conditions that are still being litigated) means that the government is disapproving C1s acquiring regional/short line assets in the US, then it would be a boost for the Infrastructure Fund sector….
Anthony B. Hatch
abh consulting
http://www.abhatchconsulting.com
abh18@mindspring.com
Twitter @ABHatch18